Bribes and Firm Value

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Corruption reduces levels of investment and, ultimately, economic growth. Indeed, the World Bank estimates that corruption costs $2.6 trillion (5 percent of global GDP) per year, with $1 trillion paid in bribes every year. Corruption in the form of bribery is also widespread across firms. One in three firms believe competitors use bribes to secure public procurement contracts. In an attempt to fight corruption, some developed nations have implemented unilateral regulation punishing the use of bribes; other nations—most notably, China and India—have not. Opponents of anti-bribery regulation argue that such regulation puts affected firms at a competitive disadvantage vis-à-vis competitors on the grounds of bribes facilitating doing business in certain regions or industries.